How to Grow to 100 Units: Should You Franchise?

You have a great concept with a lot of potential. But franchising isn’t right for everyone.

By Mary Boltz Chapman, Editor-in-Chief -- Chain Leader, 3/1/2006

For restaurant concepts that are eager to start national expansion, franchising might look like an easy and fast way to get a little cash, share some risk and open a lot of units. But like many “overnight successes,” a lot of work and experience must come first. Some concepts and operators just aren’t ready for franchising. And some may never be.

Personality Plus
A look in the mirror is a good place to start to determine if franchising is for you. If you’re very entrepreneurial, the type of person who makes decisions from the hip, or not willing to listen to other people’s ideas, it’s probably not. Franchisees appreciate structure and stability, and they expect to have input on the strategic direction of the concept.

Also examine your own personal goals. If you look forward to a comfortable life with your family, you might decide to prepare your concept for sale instead. Very aggressive and competitive people might find fast expansion appealing.

Recruiting and supporting franchisees is a different job than running restaurants, and it requires a different set of skills such as sales, administration and leadership. Do you have those skills? Does someone else in your organization? It also takes a lot of time; you’ll need to determine if you have the hours and resources to allocate to something beyond your core business.

Package Deal
Evaluate the concept and the systems it has in place. If you have a good, solid brand that’s clearly differentiated from its competitors and has a long-term supply of potential customers and employees, you have a good start.

Store economics must be tight and consistent from store to store. You should be able to predict the cost of building, opening and running a unit. Franchisees will want to make profits after they pay royalties and their own “salary.” You’ll have to demonstrate that the concept works in different markets and types of locations. That means at least a few years of experience under your belt.

Everything that happens in a restaurant has to be reproducible and trainable. If operating the unit requires skills you can’t teach in a few weeks, it’s probably not going to succeed.

Even if you’re sure your concept can compete for customers, it might not stand up against other franchises—restaurants or not. Check out what similar companies are charging for franchise fees, but balance that with the expenses of recruiting and supporting franchisees.

Have You Got Their Back?
Your company has to have the systems and support in place to help franchisees with everything from hiring and real estate to marketing and communications. The more sophisticated and advanced those systems are, the more sophisticated a franchisee you’ll attract.

Such systems need to be ready prior to franchising, which requires investments in infrastructure like administrative support, training and menu development.

Like so many questions, “should you franchise” is not easy to answer. If you honestly examine your company and yourself, you’ll be better able to answer it.